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Funds, also called ‘tracker funds’, are financial instruments that have been set up to match or ‘track’ the price of a market index. Investing in a fund lets you get exposure to different financial assets like shares and bonds, without having to buy them directly.
A tracker fund is a fund that’s been set up to match the price of a market index. Investing in a tracker fund lets you invest in the different assets included in a market index, without having to buy things like shares or bonds directly.
Tracker funds enable you to invest in a large group of companies with a single investment. They are created by a fund provider – examples include Vanguard or Legal & General – and are looked after by a fund manager.
Tracker funds are also known as ‘passive investments’. That’s because the fund manager doesn’t decide what to invest in. Instead, the fund manager will invest in the same companies or assets that are included in the index that the fund tracks, according to their weighting in that index. Examples of an index include the FTSE 100, or the S&P 500.
In doing so, the fund will closely ‘track’ the underlying index’s price movements – and investing in the fund will mean that your investments will mirror the index’s performance. If the index is doing well and rising, your investments will go up in value. If it’s doing badly and falling, your investments will go down in value.
Investing in tracker funds is low-effort – you need to put work in at the start to research a fund and make sure it’s right for you. But once you’ve invested, the fund manager will take care of ensuring the fund is performing as it should.
Here are some examples of tracker funds that we offer at Moneybox.
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All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest.